In this guide, learn about the three most common types of project organizational structures, so that you can determine which one best suits your project. Plus, find expert tips and industry examples of how to apply these organizational structures. Show
Included on this page, you’ll find information on the types of organizational structures, the pros and cons of each structure, a step-by-step guide to making a project organizational chart, and industry examples. What Is Project Organization in Project Management?The term project organization refers to the style of coordination, communication, and management the project team uses throughout a project lifecycle. By applying project organization, you optimize resources, provide clear communication about roles and responsibilities, and reduce potential roadblocks. Why Is Project Organization Important?Project managers use project organization to align team members before and during a project. The process minimizes disruption to your workflow and conflict among team members, as well as leads to maximum productivity among team members involved in a project. While excellent project organization strategy and execution are important, you also need to consider the opportunity cost of a poorly organized project. Anthony C. Taylor, Managing Partner and Lead Facilitator at SME Strategy Management Consulting, works with senior leadership to help strategically implement organizational management. He notes that the positive attributes of project organization are to prioritize and better allocate resources, keeping in mind that the project will have various stakeholders. According to Taylor, if project organization and strategy are not an essential part of a project, it’s easy to fall into the “multiple destination trap” where people don’t know where they’re going. This creates different expectations among the team members, causing them to spin in circles and avoid risk. Well-executed project management organization is part of what creates a “one destination” solution, says Taylor, where everyone knows where they’re going to ultimately deliver business value.
Taylor elaborates on the opportunity cost: “What does it cost if it’s not working for you? If team members are not focused on the right priorities, they will do x, y, and z outside of the project priorities and inhibit progress. If people aren’t clear where they’re going, they’ll quit without knowing the wants, needs, and expectations of everyone around them. What then is the cost to attract, hire, retrain, and lose productivity?” Creating and communicating a project management organization structure is one tool to help connect strategy and vision across those involved in the project. Developing a project organization structure ultimately reduces disruptions, overlaps, conflicts, uncertainty, and confusion before a project even begins. What Is Organizational Structure in Project Management?A project management organizational structure is used to determine the hierarchy and authority of people involved in a specific project. The structure defines each team member’s function and the reporting lines on a chart for team members to reference during a project. Types of Project Organizational StructuresThere are three types of organizational structures in project management: functional, matrix, and projectized. Each project structure framework is determined by the authority, roles, and responsibilities of the team members within the existing organizational structure. Because no two projects are alike, no organizational structure will be exactly the same. The role of the project manager changes within each of these frameworks, and each project’s organizational structure is highly nuanced. Understanding the vertical or horizontal coordination of each framework and the role that the project manager will hold can help you to develop a successful strategy. Functional Project Organizational StructureA functional project organizational structure organizes its hierarchy around traditionally functioning departments. A functional manager heads each department and reports to an executive. These functional managers — not other staff — coordinate the project, and they select team members from each department to support the project, in addition to their functional responsibilities.
Projectized Organizational StructureA projectized or project-based organizational structure creates a dedicated project division within an organization. The project coordination operates vertically under this division. Project managers maintain sole authority for the project and are assigned dedicated staff who work toward project goals.
Matrix Organizational StructureA matrix organizational structure is set up on a grid to demonstrate staff reporting patterns to more than one authority. It is a hybrid of functional and projectized organizational structures, and project managers share authority with other program managers in this structure. Depending on the decision-making capacity of the project manager, a matrix structure is one of three subtypes: weak, balanced, or strong. Weak Structure
Balanced Structure
Strong Structure
Project Organizational Structure Quick-Reference GuideUse this quick-reference guide to help determine the pros and cons of your project organization structure, as well as the managerial skills you need to prioritize in order to ensure your project runs as smoothly as possible. PROJECT ORGANIZATIONAL STRUCTURE: QUICK REFERENCE
Some organizations adopt a dedicated project management office (PMO) due to the high volume and variety of projects. This allows for better visibility of projects across the organization, improves resource allocation, and increases productivity and ROI across projects. Read our article with expert tips and best practices for PMOs. Features of an Organization StructureThe features of an organizational structure define the roles and relationships among members of the project, as well as between projects. These relationships are determined by authority, communication lines, coordination, supervision, and responsibilities. Specifically, the primary features of a organizational structure are as follows:
How to Make a Project Organizational ChartTo make a project organizational chart, first assess the goals of the project, identify the core team, and assign them appropriate roles to the project. Develop the organizational chart by mapping out the roles and responsibilities of each team member. The PM will make the organizational chart during the initiation phase of the project so that the project manager can communicate with team members before the project begins. The team will then use it in the project planning phase to help divide tasks among team members. Doing so provides a clear understanding of each role, empowers team members to own their roles, and brings respect to other positions within the project, which immediately builds trust. The project organizational structure needs to be flexible and might require adjustments during the other phases of the project. Make sure to communicate any adjustments to the organizational chart (including staffing decisions) to the team members. Developing a project organizational chart requires the following six main steps: Step 1: Align the Project with Organizational Strategy Step 2: Analyze Projects on an Organizational Level Step 3: Determine Roles and Responsibilities Step 4: Structure the Chart Naturally, the organizational structure will begin to emerge as one of the three types of organizational structures. Map out the workflow, reporting, and hierarchical roles and compare them to see if a different organizational structure would be more fitting. Depending on your learning style, it may be helpful to use sticky notes to move team members around before drafting your structure online. As you plan, ensure that you distribute the workload evenly among the team. Step 5: Finalize the Organizational Chart Step 6: Communicate Bonus Step: Create an Organization Chart that Represents the Client’s Reporting Structure
Leading authority on practical project leadership Eric Verzuh, President and Founder of Versatile Company, points out that “a project manager needs to understand their own reporting structure as well as the client’s reporting structure. When both the project team and the client understand each other’s reporting structures, they can plan to communicate with the right people.” What to Consider When Making a Project Organizational ChartA project organizational chart is shaped by many factors, which create the environment for project-related decision making. These factors can include internal project constraints (physical and operational), as well as external factors, such as market conditions. In their article, “An analysis of the main project organizational structures: Advantages, disadvantages, and factors affecting their selection,” J.R. San Cristóbal, V. Fernández, and E. Diaz state that there are “several important aspects to consider. All of these factors will shape the context in which decisions are made, the form of the organizational structure, the ability of project managers to make decisions, and (first and foremost) the future of the project.” These factors can be grouped into three broad considerations for making a project organization chart:
Best Practices when Picking a Structure and Making a ChartWhen picking an organizational structure, optimize talent and resources. Doing so creates a high-performing team that can successfully deliver the goals of the project. Verzuh, of Versatile Company, also recommends keeping things simple. He urges people to ask, “‘What is the best organizational structure to help you accomplish your goals and vision?’ Without clear goals and vision, the structure you select may not make sense.” Read more of Verzuh’s expertise in his book, The Fast Forward MBA in Project Management: The Comprehensive Guide, Easy-to-Read Handbook for Beginners and Pros. He continues, “There isn’t one best way. No matter what you come up with, there will be pros and cons to each organizational structure. Your organization has to build, test, adapt, and see which is going to be best for the project needs, resources, and ultimate goals.” Taylor, of Strategy Management Consulting, adds that you should ask yourself, “How can I structure my team so they can be high performing for maximum quality, output, money, and communication?” Don’t force what doesn’t fit. When creating a team, the people aspect is more important, along with communication. Keep in mind how people work together, especially when adding a new team member. When one person on the team changes, you have a new team. Below are some best practice key takeaways:
Examples of Project Management Organizational StructureProject management organizational structures vary based on the needs of the project and the organization. In an established organization, a management structure already exists. Examples of project management structures will fit within the existing organizational structure to best utilize resources. When applied to real-world examples, we can see how industries like manufacturing, construction, and software development use the functional, matrix, and projectized organizational structures. Example of Functional Project Organizational Structure for ManufacturingA team using a functional organizational structure in manufacturing shows the straightforward reporting structure of each department to the executive. The functional managers (the manufacturing manager, marketing manager, engineering manager, etc.) are responsible for coordinating all parts of the project, as indicated by the green highlight in the below image. Note the true horizontal coordination of the project. This example also shows that existing departments in the organizational structure (finance, HR, etc.) may not typically be involved in projects.
Example of Projectized Project Organizational Structure for ConstructionConstruction teams most commonly use projectized organizational structures. Dedicated project managers coordinate all aspects of the project, and multiple project managers report to the company executive. Other supporting departments may also exist to run the business operations of the company.
Example of Matrix Project Organizational Structure for Software DevelopmentSoftware development project management structures can vary widely, but they most often optimize for cross-functional teams. The matrix structure shown below is a visualization of such cross-functional reporting, wherein each technical specialist reports to both a head of their discipline and the product owner (in lieu of a project manager).
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Which form of departmentalization divides organizations according to the areas of the country they serve?What is functional departmentalization? Functional departmentalization is an organizational structure where business leaders divide teams according to the professionals' areas of specialization.
What type of authority flows up and down the chain of command?scalar principle (chain of command) a clear definition of authority in the organization. This authority flows down the chain of command from the top level to the first or lowest level in the organization.
What is the main problem with the matrix structure's dual reporting relationship?Major problems occur in a dual-reporting situation when the decisions made by the authority figures are in conflict. Many times, the authority figures are in constant conflict with each other to begin with, and when one demands more attention, there's no mediator in the middle.
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